The percentage cost of collection at the port of Manila includes the cost of the insular collector's office and the cost of supervision, office supplies, furniture and fixtures for the whole customs service.

IMMIGRATION.

The following table shows the number of passengers arriving at and departing from the Philippine Islands from the fiscal year 1904 to and including the fiscal year 1907:

From this table it will be noticed that since 1904 there has been a steady decrease of immigration of Americans to the Philippine Islands which is coupled with a steady increase in the departures of Americans for the home land or other countries.

The immigration to the islands from Japan was 2,770 in 1904, 1,167 in 1905, 277 in 1906, and 374 in 1907. In 1906 there were 94 more departures than arrivals of Japanese, and in 1907 the number of arrivals of Japanese exceeded the departures by 56.

The number of Chinese arriving in the islands during the fiscal year 1907 was 8,141, of which number 71 were rejected, 36 on account of loathsome or dangerous contagious diseases, and 35 for other

causes.

In

Prior to October 28, 1904, the decision of the Supreme Court of the United States in In re Mrs. Gue Lim (176 U. S., 459) was construed to apply only to such children as were of tender years and needed parental control and guidance as a matter of humanity. accordance with the rule said to prevail in the United States, the secretary of finance and justice held that children required parental control and guidance until they had reached the age of 21. In consequence, the business of importing minor children has assumed large proportions, and it is evident that the liberality in admitting minor children is abused. During the fiscal year 1906, 511 Chinese children applied for admission and of these only 49 had reached the age of 16 years. In 1907, 938 minors applied for admission, of whom 124 were over 16 years of age. Of the 938 minor children who came into the islands in 1907, it is remarkable that but 35 were daughters, and equally remarkable is it that these minor children, in the overwhelming majority of cases, have become clerks, porters, laborers, and coolies in the employ of Chinese and other business houses. It is very evident that under the interpretation given to the term "minor child," the importation of Chinese laborers over 16 and less

than 21 years of age has been made comparatively easy. Several children imported as minor sons or daughters have been subsequently discovered to have been nothing more nor less than slaves, and 1 case that of Chan Hoi Man-has recently been made the subject of criminal prosecution in the hope of putting a stop to frauds of this kind on the immigration law.

The number of Chinese arriving during the fiscal year 1907 with No. 6 certificates was 320, of whom 112 were merchants, as compared with 84 for the year 1906, of whom 55 were merchants. Of the 112 merchants arriving in 1907, 28 came from Amoy, 3 from Hongkong, 4 from Canton, 72 from Foochow, 4 from Shanghai, and 1 from Formosa. Of the 55 merchants who landed in the islands in 1906, 42 came from Amoy, 1 from Canton, 5 from Foochow, 5 from Shanghai, and 2 from Formosa. The great increase in the number of merchants arriving from Foochow during the fiscal year 1907 was due to the activities of the Pu An Guaranty Company, which was engaged in promoting immigration to the Philippines by methods designed to secure the successful landing of its clients regardless of the law in such cases. This company has been suppressed and it is presumed that during the present fiscal year the number of merchants arriving from Foochow will be considerably diminished.

MERCHANT MARINE.

The number of masters, chief mates, second mates, third mates, patrones, chief engineers, first assistant engineers, second assistant engineers, and bay and river engineers holding unexpired licenses and certificates and available for service, and those holding expired licenses and certificates and not available for service are as follows:

From this table it appears that there are 50 Americans, 654 Filipinos, and 70 foreigners, who hold unexpired licenses and certificates and who are available for service in the merchant marine. The number of those available and holding unexpired licenses and certificates is just about sufficient to supply the demands of the coastwise trade. In all probability the failure of many marine officers to renew their licenses for the fiscal year 1907 was due to the poor prospect of obtaining employment. In view of this fact it would seem that some modification should be made in the law which permitted

the issuance of certificates of service to foreigners, and that such certificates of service should now be limited to foreigners who were residing in the Philippine Islands on April 11, 1899.

PERSONNEL.

During the past three years there has been a gradual decrease in the number of Americans and a gradual increase in the number of Filipinos employed in the customs bureau. In the year 1904 there were 219 Americans and 218 Filipinos in classified positions in the Manila custom-house and 173 Filipinos in the unclassified service. In 1905 the number of Americans in the classified service was diminished to 194 and the number of Filipinos increased to 272. The number of Filipinos in the unclassified service was 146. The diminution in the number of unclassified Filipinos was due probably to transfers to the classified service after examination. In 1906 the number of Americans in the classified service was further diminished to 188 and the number of Filipinos increased to 288. The number of Filipinos in the unclassified service was 157. In 1907 the number of Americans in the classified service was reduced to 142 and the number of Filipinos to 261. The number of Filipinos in the unclassified service was increased from 157 to 175. There are now employed in the Manila custom-house 142 Americans and 436 Filipinos.

For further and more complete details of the operations of the bureau of customs reference is hereby made to the report of the insular collector of customs which is hereto annexed, made a part hereof, and marked "Exhibit No. 3."

BUREAU OF INTERNAL REVENUE.

COLLECTIONS.

The following table shows the total collections made during the fiscal years 1907 and 1906 by the collector of internal revenue acting for and in behalf of the insular government, to wit:

The following table shows the collections made during the fiscal years 1907 and 1906 by the collector of internal revenue as ex-officio assessor and collector for the city of Manila, to wit:

The following is a résumé of the collections made by the bureau of internal revenue for the insular government and for the city of Manila:

Of the total collections made by the bureau of internal revenue 63 per cent was collected in Manila and 37 per cent in the provinces. As appears from the résumé, the total amount of internal-revenue taxes collected, exclusive of opium taxes, weights and measures, and San Lazaro rentals, was P9,432,095.52, which is distributed among the insular, provincial, and municipal treasuries as follows:

COST OF COLLECTION.

The cost of making the collections for the insular government and the city of Manila was P640,461.47, which is slightly more than 5 per cent of the total sum collected. In this cost of collection, however, is not included the value of the services rendered by provincial treasurers and their subordinates to the bureau of internal revenue. Adding to the cost of collection a proportionate amount for the services rendered to the bureau of internal revenue by provincial treasurers and their subordinates, it may be assumed that the cost of collection is not very much less than 7 per cent. This high cost of collection is due, first, to heavy cost of transportation in the provinces, and, second, to the fact that the work of the bureau has not been thoroughly systematized.

The labor of locating stills, instructing small shopkeepers in their duties, and the detection and correction of the frauds of small dealers has been something enormous. When the people have become accustomed to the internal-revenue law and the bureau can dispense with its educational department and such extra officials as are now employed for the purpose of procuring data as to the manufacture and production of alcohol and tobacco and other matters pertinent to the intelligent regulation of internal-revenue collections, the expense of collection ought to be very materially reduced. In fact, it ought not to greatly exceed the cost of collecting customs duties.

The consolidation of the division of assessments and collections of the city of Manila with the bureau of internal revenue made the collector of internal revenue ex-officio the city assessor and collector, and has brought about a substantial saving to the city in the collection of its taxes. This consolidation was effected on January 1, 1906. The following table shows the cost incurred by the city in the collection of its taxes from and including the fiscal years 1904 to

1907:

1904.

1905.

1906.

1907.

P163, 791. 38

131, 747.60 104, 478. 19 100,000.00

The percentage cost of collecting the city taxes during the fiscal year 1906 was 4.2 per cent. The percentage cost of collecting in 1907 was 3.7 per cent.

ALCOHOL AND TOBACCO PRODUCTS.

Distilled spirits.-During the year the bureau of internal revenue has actively continued its work of inducing distillers to abandon the native nipa distilling apparatus called "cauas" and to substitute therefor modern stills. It was found that the modern still, as it is known in the United States, was open to the objection: First, that the spirits produced by it lacked the distinctive flavor of the nipa palm or cocoa tree demanded by local consumers; and second, that the cost was beyond the means of small distillers, unless they organized themselves into associations or partnerships, which required a partnership accounting system and a more or less careful supervision of the business by all the partners if a fair division of profits was to be secured. The first objection was overcome by the making of a